Poland is moving ahead with its reverse mortgage program, scheduled to launch this spring, months after initial research was done to test its viability. A reverse mortgage law is currently being prepared by the Economy Ministry according to the Warsaw Business Journal.
The report, which compares current lifetime annuity options to the new reverse mortgage plan, will assist homeowners in tapping their equity over time.
“The way a lifetime annuity works is the homeowner exchanges ownership of his or her home with a bank, which in turn pays him or her a lifelong annuity, while he or she maintains their right to reside in the home until they pass away,” Marcin Krasoń, an analyst at Open Finance, told WBJ.
One difference is the amount that home owners can earn from either a reverse mortgage or a lifelong annuity.
“With lifelong annuity a 65-year-old woman with an apartment worth zł.400,000 would get between zł.500 and zł.600 per month and a 65-year-old man zł.700 to zł.800 per month … with a reverse mortgage this woman could get up to zł.700 and this man up to zł.1,100,” said Bartosz Turek, a real estate market analyst at Home Broker.
Mr Turek explained that the reason women earn less in both cases is that, on average, they live longer than men.
Another difference between a reverse mortgage and a lifelong annuity concerns the moment when ownership of the home is passed to the bank.
“With a lifelong annuity the ownership of the estate is transferred from the homeowner to the bank the moment the contract is signed … when it comes to reverse mortgages the ownership of the home is transferred 12 months from the death of the homeowner, giving the rest of the family a chance to retain the home if they pay for all the credit taken out by the homeowner,” Mr Turek said.
He said that from the point of view of both of these differences, the reverse mortgage seems like a safer solution.
Read the full Warsaw Business Journal article.
Written by Elizabeth Ecker